Posted on January 1, 2017

Noun:
A small, thin, sharp piece of wood, glass, or similar material broken off from a larger piece.

Verb:
1 Break or cause to break into small sharp fragments
1.1(of a group or organization) separate into smaller units, typically as a result of disagreement.

Fragmentation—whether social, political, economic, or all three—has been the subject of considerable hand-wringing over the past few years. In 2016, the flashpoints of the Brexit referendum, the bitter U.S. presidential campaign and separatist stirrings in Hong Kong heightened the collective angst about special interest groups and splinter factions.

But those who aggressively challenge the status quo and its monolithic structure are not a new force. Social media may have amplified their provocative words, actions and agendas, but the likes of Boris Johnston and Donald Trump have been around since humans first clustered together in protective groups.

The dynamic that broadly drives fragmentation and consolidation cycles makes perfect sense: In the face of a common threat, large groups form for protection. Small differences are overwhelmed by a greater, shared need. Over time, as the large groups prosper and feel secure, differences emerge and disrupters gain momentum.

Political, economic or social divisions tend to be regarded with alarm because their leaders attack received wisdom and deliberately lurch toward the unknown. For example, in a world where global trade blocs and geopolitical alliances have become the entrenched norm, those who advocate a different course are considered downright dangerous. An anti-free trade position, for example, is modern day heresy.

Ironically, in business, alternating rounds of fragmentation and consolidation have been long accepted—even embraced—for the opportunities each cycle creates.

In the resource sector in particular, it’s a well-established story: A company starts small and grows organically. As it becomes bigger and well-capitalized it becomes cheaper to buy incremental growth. Over time, those acquisitions result in accumulation of various non-core assets. That corporate clutter usually drags down the value of the venture, shareholder pressure mounts and the small bits are spun off to create a host of new, highly focused companies.

Canada’s economy is rooted in that cycle of fragmentation and consolidation because of its traditional reliance on a resource-based economy. While it may be a case of making a virtue of necessity, our social history is characterized by
the accommodation of and collaboration with the special interests and agendas that are so threatening in other jurisdictions.

From the outset, we’ve had Quebec—a distinct society, language and culture—enshrined at the heart of our society. Our population has grown almost exclusively through successive waves of immigration. Our geographic sprawl and relatively sparse population means that regional identities and economies are very strong and diverse. The Canadian Constitution and our interpretation of federalism gives provincial governments considerable power.

Hence, as the emerging belief that economic concentration is undesirable and national agendas serve none well, Canada has a first-adopter competitive advantage. We’re already accustomed to demands for political autonomy from sub-national groups. We’re the country that funds and sends separate provincial delegations to UN climate change summits, by way of example.

But while we may be experienced at dealing with fragmentation at home, what remains to be seen is how we manage with it in other jurisdictions.

In dealing with our largest trade partner, we already chafe when dealing with the disparate rules of U.S. states on issues like power exports, environmental standards and scores of non-tariff trade barriers. But if our trade partners become more splintered and contentious, that could challenge—and re-define—our own loose version of national cohesion.

That said, it’s unlikely to change the Canadian course.

The late American politician Tip O’Neill famously observed that “all politics is local,” that people judge policies by their impact on those closest to them. As the world becomes more intertwined, the impact of new policies becomes greater—and so does the scale and complexity of what they aim to achieve. The surprise, in the end, is not that fragmentation continues to exist, but rather that against all odds, it has not yet won the day.

Fragmentation—whether social, political, economic, or all three—has been the subject of considerable hand-wringing over the past few years. In 2016, the flashpoints of the Brexit referendum, the bitter U.S. presidential campaign and separatist stirrings in Hong Kong heightened the collective angst about special interest groups and splinter factions.

But those who aggressively challenge the status quo and its monolithic structure are not a new force. Social media may have amplified their provocative words, actions and agendas, but the likes of Boris Johnston and Donald Trump have been around since humans first clustered together in protective groups.

The dynamic that broadly drives fragmentation and consolidation cycles makes perfect sense: In the face of a common threat, large groups form for protection. Small differences are overwhelmed by a greater, shared need. Over time, as the large groups prosper and feel secure, differences emerge and disrupters gain momentum.

Political, economic or social divisions tend to be regarded with alarm because their leaders attack received wisdom and deliberately lurch toward the unknown. For example, in a world where global trade blocs and geopolitical alliances have become the entrenched norm, those who advocate a different course are considered downright dangerous. An anti-free trade position, for example, is modern day heresy.

Ironically, in business, alternating rounds of fragmentation and consolidation have been long accepted—even embraced—for the opportunities each cycle creates.

In the resource sector in particular, it’s a well-established story: A company starts small and grows organically. As it becomes bigger and well-capitalized it becomes cheaper to buy incremental growth. Over time, those acquisitions result in accumulation of various non-core assets. That corporate clutter usually drags down the value of the venture, shareholder pressure mounts and the small bits are spun off to create a host of new, highly focused companies.

Canada’s economy is rooted in that cycle of fragmentation and consolidation because of its traditional reliance on a resource-based economy. While it may be a case of making a virtue of necessity, our social history is characterized by
the accommodation of and collaboration with the special interests and agendas that are so threatening in other jurisdictions.

From the outset, we’ve had Quebec—a distinct society, language and culture—enshrined at the heart of our society. Our population has grown almost exclusively through successive waves of immigration. Our geographic sprawl and relatively sparse population means that regional identities and economies are very strong and diverse. The Canadian Constitution and our interpretation of federalism gives provincial governments considerable power.

Hence, as the emerging belief that economic concentration is undesirable and national agendas serve none well, Canada has a first-adopter competitive advantage. We’re already accustomed to demands for political autonomy from sub-national groups. We’re the country that funds and sends separate provincial delegations to UN climate change summits, by way of example.

But while we may be experienced at dealing with fragmentation at home, what remains to be seen is how we manage with it in other jurisdictions.

In dealing with our largest trade partner, we already chafe when dealing with the disparate rules of U.S. states on issues like power exports, environmental standards and scores of non-tariff trade barriers. But if our trade partners become more splintered and contentious, that could challenge—and re-define—our own loose version of national cohesion.

That said, it’s unlikely to change the Canadian course.

The late American politician Tip O’Neill famously observed that “all politics is local,” that people judge policies by their impact on those closest to them. As the world becomes more intertwined, the impact of new policies becomes greater—and so does the scale and complexity of what they aim to achieve. The surprise, in the end, is not that fragmentation continues to exist, but rather that against all odds, it has not yet won the day.

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